When 100% of surveyed economists expect yields to rise you better perk up and pay attention. From a contrarian point of view. In Bloomberg’s recently conducted survey, 67 out of 67 Economists expect interest rates to rise over the next 6 months. In other words, they expect continued economic growth and an eventual tightening by the FED.
That flies in the face of our forecast. In the past I have shown that we expect yields to fall and the yield curve to flatten as the US Economy falls into a severe recession between 2014-2017 What Does The Yield Curve Yield? In fact, over the next 12 months the FED will be looking for ways to stimulate the economy and to print, instead of tightening. As far as I am concerned, 100% of the economists agreeing on the opposite is a direct validation of that view.
Don’t forget, our mathematical and timing work shows a severe bear market between 2014-2017. When it begins to develop, it is only rational that yields decline. If you would be interested in learning exactly when the bear market will start (to the day) and its subsequent internal composition, please CLICK HERE
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100% Of Economists Agree Yields Will Rise. What That Means Should Send Chills Down Your Spine Google
Market Watch: 100% of economists think yields will rise within six months
Economists are unwavering in their assessment of where yields are headed in the next half year.
Jim Bianco, of Bianco Research, points out in a market comment Tuesday that a survey of 67 economists this month shows every single one of them expects the 10-year Treasury 10_YEAR +0.41% yield to rise in the next six months.
The survey, which is done each month by Bloomberg, has been notably bearish for some time now, with nearly everyone expecting rising rates. In March, 97% expected rising rates. In February, 95% expected yields to climb. And in January, 97% held that expectation. Since the beginning of 2009, there have only been a handful of instances where less than 50% expected rates to rise.
Still, the fact that every single survey participant is bearish is striking. The last time the survey had that result was in May 2012, when benchmark yields were well below 2%.
“Literally there is maybe one economist in the United States straddling the bullish/bearish divide on interest rates. The rest are bearish,” Bianco writes.
He adds that a J.P. Morgan client survey shows that the percentage of money manager respondents who said they are underweight Treasurys is the second highest in seven years.
This is all the more surprising when we consider that investors went into 2014 thinking yields would rise significantly. Instead, the benchmark yield is lower than when the year started, as the market waded throw subpar economic data, geopolitical tensions, and uncertainty over the Federal Reserve. The 10-year note last traded at a yield of 2.72% on Tuesday, down from just over 3% on Dec. 31.
Then again, a separate poll of economists recently showed that exactly zero expect the economy to contract.
But when the entire market thinks one thing is about to happen, the opposite outcome is often in store, notes James Camp, managing director of fixed income at Eagle Asset Management. So don’t count out that result with Treasurys, he advises.
“It’s the most hated asset class,” says Camp, but Treasurys are some of the best performers year-to-date.